Rahul Pathak and Divyata Manvati coauthored this piece.

Heading into 2026, the pharmaceutical and biotech industries face an operating environment in flux. Each year, we step back to assess how the healthcare landscape is shifting and how pharma is adjusting to compete within it.

While today’s uncertainty may feel unnerving, the direction of travel is clear: a near-term situation characterized by lower prices, deglobalization of the drug supply chain, shifting clinical priorities and reduced funding for early-stage innovation.

At the same time, several forces are working in the industry’s favor, headlined (as usual) by breakthrough science and the (continued) acceleration of AI and data maturity.

The external forces reshaping the pharmaceutical industry in 2026

In 2026 four powerful external forces will bear down on the pharma and biotech industries.

1. Regulatory and geopolitical volatility. The U.S. environment is becoming more protectionist and complex, with increased intervention across pricing, clinical standards and oversight. This creates material strategic risk for pharma across cost structure, evidence generation, launch economics and R&D priorities. Since early 2025, the federal government has used its executive authority to advance a set of policy measures aimed at lowering drug prices in the U.S. and encouraging other countries to pay more for innovation. These measures fall into four broad categories:

• Aggressive trade and tariff regime. New U.S. trade measures, including 15% tariffs on pharmaceutical imports and “U.S.-first” production incentives, are raising the cost of globally manufactured products and accelerating reshoring supply strategies. Analysts estimate these tariffs alone could add $13-$19B in industry costs, with some portion likely passed through to customers.
• Innovation funding cuts. Deep workforce and budget reductions across the Food and Drug Administration (FDA), National Institutes of Health and other federal health agencies are constraining the nation’s scientific capacity and slowing early-stage research. These cuts risk a long-term innovation slowdown as agencies lose staff, suspend activities during shutdowns and face multibillion-dollar funding gaps.
• Shifting regulatory priorities. Federal public health priorities are being redirected toward chronic disease and lifestyle interventions, while support for certain modalities—mRNA, for example—has been reduced via canceled BARDA projects and new vaccine evidence standards. At the same time, regulatory requirements are tightening in some areas and loosening in others, creating uneven expectations for evidence generation.
• Coordinated pricing reform through policy. Most-favored nation (MFN) pricing and new Medicaid international-reference models are exerting downward pressure on U.S. drug prices. Combined with expanded biosimilar interchangeability and development cost reductions, these policies threaten both near-term revenue and long-term global investment decisions.

2. Shifting customer and consumer expectations for healthcare. Healthcare providers and systems are under mounting strain, widening care gaps and lowering the perceived value of pharma engagement. As capacity erodes and expectations rise, HCPs have less time and tolerance for traditional pharma interactions. This is pushing HCPs to skip engagements that don’t either save time or add clinical value.

Patients, meanwhile, increasingly seek seamless experiences, transparency and tangible value that the system often struggles to deliver. With care fragmented and time with clinicians limited, patients are increasingly turning to AI-enabled tools, alternative care providers and direct-to-consumer access models to reduce friction, improve affordability and regain agency in their care journeys.

3. Innovative science at a crossroads. Scientific progress continues to redefine disease understanding and push the boundaries of what’s clinically possible. Just look at recent advances in early heart at risk identification through multibiomarker testing, first-of-its-kind in vivo CRISPR base-editing therapy and breakthroughs in synthetic biology.

But the funding mechanisms fueling this progress are under pressure. In the U.S., a biopharma ecosystem long reliant on publicly funded basic research faces heightened uncertainty due to cuts to federal agencies and grant freezes to university research programs. The U.K. and EU countries, meanwhile, are walking back commitments to R&D innovation. We’re also seeing a pullback in venture capital funding for biotech.

Against this backdrop, China is accelerating its transition into a frontline engine of biopharma innovation, with 20% of all drugs in development today from China-based companies.

4. Data, tech and AI moving from ‘hype’ to ‘here and now’

Digital infrastructure, AI-enabled clinical tools and connected care models are reshaping how clinicians deliver care and how patients navigate the system. Hospitals, health systems and emerging health tech players are deploying AI to expand capacity, improve access and streamline workflows. The combined effect is to heighten expectations for real-time insight, personalized support and frictionless experiences across the entire care journey.

Five priorities for pharma and biotech in 2026

Leading pharma and biotech companies are sharpening their focus on the few areas that matter most to sustain enterprise value and weather the forces described here. We see five priorities consistently rising to the top of executive agendas. Doubling down here should allow companies to absorb today’s shocks and convert emerging tailwinds into durable advantage.

Pharma priority no. 1: Infusing AI across the R&D value chain

While most tech leaders ZS surveyed say they’ve yet to see measurable payoff from their data, digital and AI investments across research and discovery (17%) and clinical development (29%), they expect that to change in 2026: Nearly half expect their investments to drive measurable value in the year ahead. No wonder clinical development and R&D are slated to garner the largest share of AI, digital and data investment over the next year.

AI is maturing into a full-stack R&D force, reshaping how drugs are discovered, designed and developed.

Here’s where companies are leaning in the most:

• AI-discovered drugs. Across oncology and fibrosis, companies like Iambic, Insilico and Recursion are advancing AI-designed drugs into first-in-human and even midstage trials, signaling that end-to-end AI drug creation has become a real and repeatable part of drug development. AI-native biotechs have shown materially higher phase 1 success rates while shortening discovery and development timelines by between 40% and 50%.
• Big tech partnerships. From Nvidia-powered supercomputers and gen AI platforms that cut documentation time by over 90% to GPT-driven workflows inside the lab, pharma’s partnerships with big tech promise to speed experimentation, compress timelines and raise the precision of R&D decisions.
• Agentic, automated workflows. Leaders are increasingly testing how agents can reason, act and adapt in real R&D workflows. In our survey, 41% are making plans for automating entire R&D discovery workflows with intelligent AI agents.

Pharma priority no. 2: Build the portfolio of the future

For 2026 and beyond, we see pharma continuing to focus on first-in-class innovation driven by unmet need and centered on patient convenience.

Creating first-in-class innovation and differentiated modalities

Despite pervasive regulatory uncertainty and a slow first half of the year, FDA approvals for 2025 ended the year around their five-year average. Novel modalities accounted for 30% of approvals. This includes Sanofi’s Qtiflia, Merck’s Keytruda QLEX and Vertex’s Journavx, each of which reflects a push toward differentiated science paired with greater patient convenience.

The year ahead promises more therapies with the potential to dramatically improve standard of care. This includes dueling oral GLP-1s from existing obesity market leaders Lilly and Novo Nordisk; a first-in-class pill for narcolepsy, which treats its root biological cause rather than masking its symptoms; and the first needle-free treatment for anaphylaxis.

A focus on differentiated modalities, such as RNA-based therapies and gene therapies, is exemplified by advances in RNAi for cardiovascular risk and one-time genetic approaches targeting disease root causes.

At the same time, renewed investment in therapeutic areas with a history of clinical, scientific and commercial uncertainty, such as mental health and Alzheimer’s disease, reflects the industry's willingness to place larger bets on science-led differentiation.

Adapting portfolio, pricing and launch strategies to rising costs

Pharma and biotech companies are making targeted decisions in response to tightening policy and market pressure. They’re doing this along four tracks:

• Reprioritizing portfolios: This includes cutting programs in favor of high-value assets and aggressive mergers and acquisitions activity characterized by shifting spending (from oncology to CVD and metabolics) and a growing shift toward Chinese biotechs.
• Cultivating an “always launching” mindset, with tighter pricing and sequencing discipline: ZS analysis projects at least 70 new launches each year between now and 2029, with companies such as BMS, AstraZeneca and Roche planning to launch at least 15 new products per year by 2030. At the same time, mounting pricing pressures are forcing companies to be more deliberate about where, when and at what price they launch products. This shows up as price reductions in the U.S. (see: Lilly, Novo Nordisk, Pfizer, AstraZeneca, EMD Serono and others) as well as price increases in Europe and the U.K.(see: BMS, AbbVie and Lilly), with local decisions increasingly shaping global access, reference pricing and long-term value realization.
• Reducing SG&A: Reports suggest the biggest pharma companies need to cut roughly $32 billion from their expenses by 2030, which nets out to roughly $3 billion a year in rebates and discounts that continue to chip away at net price.

Pharma priority no. 3: Fortifying global operations

In supply chain and manufacturing, a shift is underway from reactive supply chains to intelligent, predictive and automated networks powered by AI and advanced capabilities. Companies are also moving decisively to rebalance manufacturing footprints by regionalizing supply chains to strengthen resilience and proximity to markets.

Smart manufacturing, circular supply chains and sophisticated demand forecasting

In ZS’s survey of 115 U.S.-based tech executives from multinational pharma and biotech firms, respondents said they’ve seen limited impact (24% measurable value) from their investments in data, digital and AI. But 57% say they expect to see strong returns in the year ahead, especially from AI and analytics tools that reduce stockouts and more accurately predict demand. One in three say they plan to automate entire workflows through intelligent agents.

• Gilead is investing $32 billion in U.S. manufacturing, headlined by a 180,000 square foot manufacturing and technical development hub built around autonomous robotics, real-time digital monitoring and advanced data infrastructure.
• Roche has already cut its yield variability in half and its scope one and two emissions by 31% thanks to AI-driven predictive modeling quality analytics.

Rebalancing manufacturing footprints

Pharma companies have pledged more than $350 billion in U.S. manufacturing investment to mitigate the impact of threatened levies against imported drugs. EMD Serono, for instance, announced it would manufacture IVF drugs in the U.S. for the first time, in exchange for priority review of its in-development fertility drug, Pergoveris. And Merck, Lilly, AstraZeneca and Sanofi have all paused or discontinued investments in U.K. manufacturing in favor of expanding capacity in the U.S.

Pharma priority no. 4: Reinventing customer engagement

Omnichannel orchestration isn’t new, but the ability to translate ambition into consistent, scalable execution is. Companies are now testing opti-channel approaches that use behavioral and real-world data to prioritize the right moment and mode of engagement over distributing the same content everywhere. This shift reflects a broader acceptance that AI-driven customer experience only delivers value when it is applied to the right problems, not simply layered onto existing engagement models.

Early pilots from GSK, Replimune and Novartis reflect a shift toward more selective, value-driven engagement. Pharma companies also continue to offer increased personalization while engaging and supporting HCPs, for example through:

• On-demand access to expertise. To reduce friction and respect HCP time, companies are redesigning how clinicians connect with medical and scientific experts. They’re doing this by making it easier to access relevant expertise when it is most needed, rather than relying on scheduled, one-size-fits-all interactions.
• Digitally delivered engagement and education. Companies are also expanding digital services that deliver value without requiring live interaction. This includes AI-powered chatbots, immersive and mixed-reality experiences and expert-led social content designed to support education and decision-making in more flexible ways.

This shift toward trusted, expert-led engagement will continue to grow as traditional direct-to-consumer (DTC) advertising faces heightened scrutiny in the U.S.

Pharma priority no. 5: Pushing all-in on patient engagement

Given rising consumer expectations for healthcare and changes to the macroenvironment, pharma is accelerating its transition into stewards of end-to-end patient journeys. This means moving beyond fragmented digital tools and narrow support programs toward more integrated care models that bring patients, providers and medicines onto a single, coordinated platform.

Taking direct-to-patient models mainstream. Building on earlier investments in self-assessment and remote care management, pharma is now going deeper in prioritizing direct-to-patient (DTP) models that allow manufacturers to play a more central role in access, continuity and experience delivery. What began with a few early movers has expanded rapidly, with more companies announcing DTP models to reroute patients to discounted manufacturer drugs and simplify navigation across the access journey.

These efforts signal a move toward more direct relationships with patients, positioning pharma not only as a drug supplier but also as a care enabler. Pharma now has many new avenues through which to build affordability, access and trust. Governance, transparency and guardrails will largely determine whether expanded patient engagement builds long-term trust or invites regulatory and reputational scrutiny.

How should pharma companies respond in 2026 to prevailing market and policy changes?

Taken together, these shifts are forcing pharma leaders to rethink long-held assumptions about pricing, innovation, engagement and access. The recommendations that follow outline where leadership teams should focus to navigate near-term disruption while positioning their organizations for sustained advantage.

1. Rewire access strategy with a global, scenario-driven mindset. Treat U.S. pricing as the outcome of an interconnected set of global decisions, not a standalone endpoint. Leaders should reassess launch sequencing, pricing corridors and access trade-offs for pipeline assets in light of new risks and incentives created by policy-driven pricing disruption.
2. Rethink innovation strategy beyond the traditional R&D pipeline. Broaden portfolio planning to include emerging modalities and AI-enabled approaches that can unlock new patient value and redefine long-term competitiveness. The next decade’s winners will look beyond historical models of R&D return.
3. Redesign customer engagement for a post-DTC world. Prepare for continued uncertainty and churn in promotional channels, particularly traditional DTC advertising. Leaders should accelerate the shift toward more personalized, n-of-1 engagement models with both patients and physicians, even as the dominant future mix remains unclear.
4. Build a direct-to-patient model now. Despite unresolved questions about insurance integration, trade mechanics and applicability across benefit types, DTP momentum is building and unlikely to reverse. Pharma leaders should proactively build DTP models designed to improve patient experience, access and engagement.
5. Move AI from experimentation to enterprise capability. The opportunity is no longer to pilot AI but to build trusted, scalable and fit-for-purpose solutions that improve productivity and, when safe, automate decision-making. C-suite leaders should focus on where AI can deliver durable value and invest accordingly, rather than spreading bets thinly across disconnected use cases.

Ultimately, the companies that act early on these priorities will be better positioned to absorb continued disruption and turn today’s volatility into a source of advantage.

The authors would like to thank Raluca Cenusa, Vidya Raina and Himani Sethi for their invaluable contributions to this article.